Egypt's Ezz Steel says output hit by forex shortages

An engineer watches during the pouring of molten iron into a container at a factory belonging to Ezz Steel, Egypt's largest steel producer, at an industrial complex in Sadat City, 94 km (58 miles) north of Cairo, April 17, 2013 (Reuters)

Egypt's largest steel maker Ezz Steel's first-quarter net loss increased to 136 million Egyptian pounds ($17 million) from 19 million pounds in the same period last year, hit by foreign currency shortages, the company said on Thursday.

Net sales fell to 4.8 billion pounds from 5.3 billion in the same period last year.

"Ezz Steel was not able to source sufficient foreign currency, due to a major change in the regulations of the banking sector," said Paul Chekaiban, chairman and managing director.

"As a consequence we had to limit imports of raw materials and to reduce the volume of our production and sales which has negatively impacted margins and the bottom line," he said.

The central bank cracked down on the country's foreign exchangebnlack market earlier this year in the hope of persuading foreign investors that the economy has returned to normal after four years of turmoil.

But Egyptian importers and exporters say official measures to cap dollar deposits at Egyptian banks have reduced foreign exchange liquidity and stifled business activity while failing to achieve long-term stability in the currency market.

Ezz Steel operates four plants in Egypt and controls more than half the country's steel market.

Like other heavy industries in Egypt, its profitability had suffered in recent years from weak exports and a shortage of gas as the government diverted gas supplies towards electricity production to ease regular blackouts.

However, in October Egypt imposed temporary tariffs to protect domestic steel rebar manufacturers from cheap foreign imports during the energy crunch.